On the Pacific coast in southern California, 30km north of the Mexico border, approximately 1.4 million people call the county of San Diego home. Known for its year-round good weather and beautiful beaches, San Diego is the second-largest city in California (with Los Angeles being first).

San Diego is often referred to as the ‘birthplace of California’ due to its history as the first site in the state that was settled by Europeans. In 1542, Juan Rodriguez Cabrillo claimed the area for Spain. San Diego was later part of the newly declared Mexican Empire in 1821 before eventually becoming part of the US following the Mexican-American war in 1848.

This multicultural history has left a mark on the region, according to Gary London, senior principle at London Moeder Advisors – a real estate investment advisory based in San Diego. “San Diego is a community of diversity, and it makes for a really interesting place with a blend of cultures,” he says.

London names Mexico, the Philippines, Brazil, Japan, China, Vietnam and Europe as key sources of immigration into the county. “We are becoming a land of mutts, which is ultimately a great thing,” he adds.

Lucas Coleman, director at the World Trade Center of San Diego, agrees on the benefits of this diversity. “This cross-border identity contributes to people’s openness and tolerance, and a lot of people in San Diego live and work on both sides of the border,” he says. “The influence of Mexico in particular is huge here.”

How San Diego attracts talent and investment

San Diego’s GDP has been steadily rising since 2001, with drops around the financial crisis of 2008 and in response to the impact of the Covid-19 pandemic in 2020.

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By GlobalData

In terms of foreign direct investment, San Diego saw a total inflow of approximately $3bn in 2020, according to the World Trade Center in San Diego. Furthermore, recovery from Covid-19 in terms of employment has been above average.

In September 2022, San Diego had an unemployment rate of 3.1%, which was below California’s 3.7% and the US as a whole, which sat at 3.3%.

Furthermore, the leisure and hospitality sector saw the largest amount of growth in employment between 2021 and September 2022, increasing by 13.4%.

London explains that there has been a lot of urbanisation and growth in San Diego due to its location and relatively low cost of living. “San Diego remains the least expensive major metropolitan area on the west coast, with the possible exception of Portland,” he says.

When compared with areas such as Silicon Valley, Los Angeles and Orange County, London says the cost of living is more affordable in San Diego, which in turn attracts talent.

However, London also highlights an obstacle still to be overcome in the city. “Our median income is not that high," he says. "It is fairly average and although our housing prices are not the highest in the country, they are high. The delta between the median income and the median housing price is wider in San Diego than it is anywhere else in the US.”

London explains that for those working in higher paid sectors such as technology and life sciences, housing is cheaper than if they were to work in the previously mentioned locations. “San Diego is in a perpetual state of supply-demand imbalance in the housing sector," he says. "Depending on how you calculate demand for housing, we never seem to catch up.”

San Diego's military legacy

Historically, San Diego has been synonymous with the military. In 2022, the city marked a century of hosting a key base for the US Navy. The military makes up approximately one-quarter of San Diego’s economy with the city home to the largest concentration of military assets in the world, according to the San Diego World Trade Center.

Coleman explains this has kept San Diego prominent in federal focus. “The procurement contracts that come from the federal government to help the military – with things such as satellites in wireless communications – over time has really expanded,” he says. “We have some of the most important, forward-looking, strategic work for the future of warfare, from seabed to space, happening in San Diego.”

The federal influx of dollars into military-based programmes has cultivated robust links between universities, research institutions and the military in San Diego. Coleman believes that this has built a strong innovative and entrepreneurial culture in the city, which he describes as “patent-intensive”.

Innovation helps San Diego investment profile

When it comes to innovation, San Diego-headquartered Qualcomm – a multinational that designs and manufactures semiconductors and wireless telecommunication products – shows off the city's strengths, having been responsible for around 264,000 patents globally, more than 62% of which are currently active.

London estimates Qualcomm to be the largest employer in San Diego with approximately 12,000 employees. As a result of their presence, other innovative companies such as Apple and Amazon have followed suit and chosen San Diego.

“Last year, Amazon built what I believe is their largest distribution facility, at least in North America, here in San Diego,” says London. “We have an alphabet soup of technology and life sciences companies.”

London credits the University of California, the Salk Institute (a biological studies research centre) and Scripps Research (a medical non-profit research facility) with bolstering the technology and life sciences sectors. In 2020, life sciences accounted for approximately 73% of inbound regional investment.

The University of California in San Diego also holds a large number of patents and has an active patent and patent licensing programme. It also receives a high level of National Institute of Health funding.

“San Diego is one of the largest exporters of R&D services," explains Coleman. "San Diego was the number two county in the country for defence procurement dollars. That saw lots of investment going to private companies in the defence sector and a lot of that went into R&D.”

Tourism remains key for city's economy

Aside from its multicultural charms and military history, San Diego continues to be a major global tourist destination.

Through attractions such as San Diego Zoo, the vast Balboa Park, the USS Midway naval museum, the Seaport Village (a harbour shopping and dining complex) and the historic Gaslamp Quarter, San Diego was bringing in approximately 35 million visitors a year before Covid-19.

Furthermore, San Diego Comic-Con – an annual comic book and multi-genre entertainment convention – attracts approximately 135,000 fans to the city and generates an estimated $165m in spending.

Whilst tourism has undoubtedly been a large economic driver for San Diego, London believes there are still issues to be addressed. “People in tourism jobs in San Diego are historically the worst paid people here but the unions are catching up,” he says.

A key issue is that a large proportion of the workers commute from across the Mexican border because they cannot afford to both live and work within San Diego. London explains that this poses a threat to San Diego’s tourism sector.

“Without Tijuana [a border city in Mexico], I don't know how our tourism industry would be able to be propped up," he says. "It is really expensive for those frontline workers. That is a big conundrum that our politicians and our thought leaders in this town haven't really grappled with to the extent that they should.”

While concerns around the border persist, San Diego's tourism industry has seen a robust recovery from Covid-19. Hotel revenue generated by tourists – nearly $1.9bn – is projected to surpass 2019 numbers by almost 20% by the end of 2022.

San Diego's climate and history mean that it will probably be able to rely upon a thriving tourism industry for the foreseeable future, but the city has many strings to its bow. Quality of life is a key driver for foreign investors during the site-selection process, and San Diego excels in this area, but the reputation the city is acquiring for innovation means that investment levels are likely to remain robust for some time to come.